Strategy To YieldBoost EVC To 7.6% Using Options

By
A A A

Shareholders of Entravision Communications Corp. (Symbol: EVC) looking to boost their income beyond the stock's 1.8% annualized dividend yield can sell the November covered call at the $7.50 strike and collect the premium based on the 15 cents bid, which annualizes to an additional 5.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost ), for a total of 7.6% annualized rate in the scenario where the stock is not called away. Any upside above $7.50 would be lost if the stock rises there and is called away, but EVC shares would have to climb 33% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 35.6% return from this trading level, in addition to any dividends collected before the stock was called.

In general, dividend amounts are not always predictable and tend to follow the ups and downs of profitability at each company. In the case of Entravision Communications Corp., looking at the dividend history chart for EVC below can help in judging whether the most recent dividend is likely to continue, and in turn whether it is a reasonable expectation to expect a 1.8% annualized dividend yield.

EVC+Dividend+History+Chart

Below is a chart showing EVC's trailing twelve month trading history, with the $7.50 strike highlighted in red:

Loading+chart++2014+TickerTech.com

The chart above, and the stock's historical volatility, can be a helpful guide in combination with fundamental analysis to judge whether selling the November covered call at the $7.50 strike gives good reward for the risk of having given away the upside beyond $7.50. ( Do most options expire worthless? This and six other common options myths debunked ). We calculate the trailing twelve month volatility for Entravision Communications Corp. (considering the last 251 trading day closing values as well as today's price of $5.64) to be 54%. For other call options contract ideas at the various different available expirations, visit the EVC Stock Options page of StockOptionsChannel.com.

In mid-afternoon trading on Monday, the put volume among S&P 500 components was 681,403 contracts, with call volume at 1.33M, for a put:call ratio of 0.51 so far for the day. Compared to the long-term median put:call ratio of .65, that represents very high call volume relative to puts; in other words, buyers are preferring calls in options trading so far today. Find out which 15 call and put options traders are talking about today .

Top YieldBoost Calls of the S&P 500 »



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Options

Referenced Stocks: EVC

BNK Invest

BNK Invest

More from BNK Invest:

Related Videos

Voya – Babies Retirement
Voya – Babies Retirement            

Stocks

Referenced

100%

Most Active by Volume

35,281,768
  • $8.48 ▲ 6.94%
33,656,019
  • $104.865 ▲ 1.82%
27,076,117
  • $16.66 ▲ 1.59%
25,729,230
  • $33.62 ▼ 2.55%
20,404,328
  • $12.2948 ▼ 4.17%
17,851,415
  • $97.975 ▲ 1.67%
14,504,671
  • $79.92 ▲ 1.98%
12,896,740
  • $59.0486 ▼ 15.92%
As of 10/23/2014, 11:36 AM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com